June 17, 2016

San Miguel, Globe, Smart & the 700 Mhz Band for Dummies [Pt. 1 of 2]

SMC sold the 700 Mhz band to Globe and Smart... so what's in it for you?

San Miguel Corporation has finally let go of its prized 700 Mhz band by selling it to the telco duopoly of Smart Communications and Globe Telecom. Press releases say it's good for the public, but that is just the partial truth. The tech talk is a bit difficult to grasp, so ThinkingPinoy is here to the rescue!

This article is divided into two parts:

Part 1 discusses in simple terms how cellular signals work, then it focuses on the unique characteristics of the contentious 700 Mhz band that everybody is going gaga about.

Part 2 discusses in greater detail the nuances of the SMC-Globe-Smart deal and how it affects PH internet, and how it will affect you.

Now, let's start with Part 1.

The Electromagnetic Spectrum

Electromagnetic waves are energy that can travel through vacuum. The light you see, the UV rays that burn your skin, the infrared waves in remote controls, all involve electromagnetic waves. Electromagnetic waves are roughly divided into 7 categories based on their frequency [BBC].

Let’s list these categories down from lowest to highest frequency:

1. Radio waves, used in telecommunications.
2. Microwaves, used to cook your popcorn, among others.
3. Infrared, used in TV remote controls and in optical fiber communications. Also present in sunlight, it is what makes sunlight feel warm on the skin.
4. Visible light, or the part of the electromagnetic spectrum that our eyes can see.
5. Ultraviolet, used in fluorescent lamps. Also present in sunlight, it is what makes us tan (or sunburnt).
6. X-rays, high-power waves used in medicine, among others.
7. Gamma Rays, extremely power waves used to sterilize medical equipment, kill harmful bacteria in food, and kill cancer cells, among others.

In the context of the Globe-SMART-SMC deal, we are concerned with the first category: the radio spectrum [Inq]. So let's talk about that.

The Radio Spectrum

The radio spectrum is a part of the electromagnetic spectrum containing waves whose frequencies range from 3 Hz to 3000 Ghz. Electromagnetic waves in this frequency range, called radio waves, are widely used in modern technology.

1. Very Low Frequency (VLF), used by geologists for mineral exploration [Geonics].
2. Low Frequency (LF), used for radio navigation, including some aspects of global positioning systems (GPS) [Gale 2011]
3. Medium Frequency (MF), used for AM Radio [UDel].
4. High Frequency (HF), used for air-to-ground Aviation communications [NPS].
5. Very High Frequency (VHF), used for FM Radio [USCG] and TV Channels 2 to 13.
6. Ultra High Frequency (UHF), us for TV broadcasts [Britannica] and mobile phone signals [Ashton and Laura 1999].
7. Super High Frequency (SHF), used in satellites [UK NAO].
8. Extremely High Frequency (EHF), used for security screening, such as clothing scanners in airports [USAToday]. Unfortunately, these scanners are not found in NAIA because NAIA is a crappy airport.

Now, let’s focus on the UHF Band, where the controversial 700 Mhz band belongs.

The UHF Band

The UHF band covers all frequencies between 300 MHZ and 3000 Mhz (3 GHZ). Originally, 300-800 Mhz was reserved for TV signals, while 800 Mhz to 3000 Mhz are reserved for “newer” technologies like cellular communication.

There are a number of free-to-air UHF TV channels such as Studio 23, Net25, and UNTV, with the “highest” channel being Iglesia ni Cristo TV Ch. 49 [INC TV]. INC TV Ch. 49 broadcasts at a frequency of 680-686 MHz and the global shift to digital TV (e.g. Cignal TV) makes the launch of “higher” channels unlikely.

INC's Net25 broadcasts in UHF.

Hence, this leaves the 700 to 800 Mhz band, reserved for Channels 51 to 69, unused [CSG]. Consequently, the National Telecommunication Commission (NTC) made this this section of the spectrum available for mobile phone signals.

NTC auctioned off the rights to use this frequency [NTC], and Liberty Telecom, a San Miguel Corporation’s subsidiary, emerged the winner [Star]. Meanwhile, Globe and Smart used frequencies ranging from 850 Mhz to 3000 Mhz, with the NTC setting the sections of that spectrum that each of the carriers can use to prevent signal interference [WTZ].

What’s so special about 700 Mhz?

The 700 Mhz band, the lowest-frequency band among those used for cellular communication, is considered as prime real estate by telecom companies for two basic reasons.

First, 700 Mhz transmissions have greater range.

A TV transmission tower can reach rural areas while a cellular tower with the same power cannot. This is because lower frequency transmission (TV signals) reach further than higher frequency transmissions (mobile phone signals).

With a lower frequency, a telecom company can set up fewer transmission towers to cover the same area. That is, 700 Mhz makes it cheaper to run a telecoms business. Let’s take a look at the image below:

All the purple squares that touch, or are within, the green circle can communicated with the tower. With the same amount of power, 700 Mhz transmissions reach a wider area than higher-frequency transmissions.

The two red dots are cellular towers that operate with the same power but with different frequencies. The 700 Mhz tower reaches more mobile phones than the tower that broadcasts at over 850 Mhz. (This image is for illustration purposes only).

Second, 700 Mhz transmissions can more easily pass through obstacles.

As the frequency of a transmission increases, the more difficult it is to pass through obstacles, concrete and trees.

Lying just above TV frequencies, 700 Mhz signals more easily pass through obstacles that would typically block higher-frequency signals. A 700 Mhz signal can pass through concrete and still provide decent reception, while a 2100 Mhz signal may not. For example, an iPhone 6 can receive a 700 Mhz LTE signal while inside an elevator [Rogers] or at the basement of a building.

With a lower frequency, a telecom company’s cellphone signal can reach basements, elevators, and other areas which would have been considered dead spots for higher-frequency transmissions. Let’s take a look at the image below:

The two red figures are cellular towers that operate with the same power but with different frequencies. Phone signal from the 700 Mhz tower passes through more concrete walls than those from 850 Mhz. (This image is for illustration purposes only).

Why did SMC sell its 700 Mhz rights?

To recap, the 700 Mhz band is the best possible frequency for reliable mobile phone reception. While lower frequencies imply lower connection speeds, the difference is negligible. For example, Smart plans to roll out 700 Mhz LTE-A that can reach speeds of up to 250 Mbps [Rap]. Even a tenth of that speed, if delivered reliably, will make any Juan happy.

San Miguel Corporation owned this band since the mid-2000s through its subsidiary Liberty Telecom (formerly WiTribe). Liberty Telecom, a failed venture, petitioned the courts in 2005 for corporate rehabilitation. The 10-year corporate rehabilitation plan included the rollout of its 700 Mhz WiMax products, so the government did not revoke its SMC’s rights over the 700 Mhz band [Star].

Let’s fast forward to 2015, or ten years after 2005. If not for presidential candidate’s Grace Poe’s vested interests in SMC [TP: Political Corruption], you’ve probably never heard of Liberty Telecom. Why? Because it never rolled out its WiMAX services at all [Inq].

But SMC still won’t let go. SMC entered talks with Australian telecom giant Telstra for a possible partnership that can challenge the Smart-Globe telecom duopoly [Rap]. Telstra, however, called off its Philippine expansion plans in March 2015 [Rap].To cut the long story short, SMC moved heaven and earth to acquire exclusive rights over the 700 Mhz band. However, its plan to exploit this powerful band never materialized. After 10 years and several attempts, it appears that SMC has finally given up.

What happens now?

In an ideal world, the sale of the 700 Mhz should allow Philippine telecom companies to provide better and more reliable cellular services throughout the country. For the longest time, Globe and Smart have been using “service roads” to travel from Point A to Point B. Now, the 700 Mhz band serves as an expressway that allows the two to provide faster, more reliable, and cheaper services.

The problem, however, is the term “ideal world”.

Why? Because it seems that this 700 Mhz sale from SMC to Globe-Smart simply makes it more difficult, if not near-impossible, for another telco player to enter the market. That is, the sale of the 700 Mhz band may simply reinforce the dismal state of Philippine internet.

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